Palfinger AG

Good morning, and welcome to our Q3 earnings call. Just let us start on the first slide with our equity story, what sets us apart.

I think it's the clear market leadership, so the added value we can provide to our customers as well as dealers. The strong resilience, this is driven by the broad product portfolio we have.

The solid growth opportunity, I think here, despite the Service segment, still North America, APAC and Marine offers great opportunities and the huge earnings potential by increased profitability. I think that's an important part and all the other ingredients will follow what was presented now.

Yes, we are a true global player with EUR 2.36 billion revenue in 2024 with a strong global presence, which is driven by the engineering and technology competence, sales and service network worldwide, the 30 production sites worldwide and even more important, highly motivated employees all around the globe. In addition, we are very proud that we have a strong resilience throughout the industry diversity.

So we are in many different areas of doing business. And that's the reason as well when one of the activities, one of the businesses might slow down, others can compensate.

And here as well, you can see the spread throughout the globe. On the next slide, and it is also something we also would like to remind yourself is stick to our product portfolio, including a very successful marine business, which we'll see later on in the presentation of Felix is strongly contributing to our results.

But we are never standing still. We reach higher.

So we worked for more than 9 months quite intensely on our reach higher strategy 2030+. We had a strong solid process behind, which is really bottom up and as well fully kicked off by the Board and challenged by an outside consultant.

I think this is something which we will hear later on more about it and as well in the next months to come. Where are we coming from?

We have a strong focus on 5 must-win action fields. One is related to lifting customer value, so the customer focus.

The second area is the balanced profitable growth of the service and spare parts business expansion and as well the working platform as an additional core pillar, which is heavily requested and required in the marketplace. And the third part is execution excellence, supply chain optimization and process system and data optimization as well here to make sure that we are more efficient, we are faster in better dealing with our customers and dealers.

So all in all, we are talking here about 18 programs to drive future growth and profitability. And on the next slide, this will lead, first of all, to keep our #1 position for Crane and Lifting solutions.

This is very clear commitment we have. On the other hand, as well our financial targets by 2030 is EUR 3 billion revenue, a 12% EBIT margin, 15% ROCE and as well EUR 150 million bigger, the free cash flow side.

And I think these are the elements where we are working towards and which are heavily supported by all the actions which are in place and the strategy which is defined. The growth target just that you can better understand where we are coming from and where we are going to.

So where is the biggest portion of growth coming from? No doubt it's on the service side, followed by recovery in EMEA, which is expected, which is more related to the marketplace.

Even more important, the area working platform as well a clear strategy to roll out new solutions, new successful solutions for our customers and for our dealers. Before then coming to the outlook for 2025, I ask Felix, hope you can hear for his presentation on the results to better understand where we are coming from.

Please, Felix go ahead.

Thank you, Andreas. Good morning, ladies and gentlemen.

As you are aware of, we have 3 segments in which we are steering the company and how we also report our numbers, starting with the segment Sales and Service, which comprises all sales activities of Products and Solutions as well as the service activities of Palfinger, but not the external revenue in production for third parties, which is another segment. So looking at the key developments of the first 3 quarters.

First of all, in EMEA, we have seen a substantial improvement of the order intake in Q4 of last year. This order intake has remained stable for the last 4 quarters.

However, on the other hand, we have to say that the infrastructure package, for example, in Germany has not yet showed any impact, which on the one hand, is bad news, but it's also good news because it means that all the potentials out of those infrastructure packages in Europe are still ahead of us. If we then go to North America, we had quite some developments in summer, the increase of tariffs from 10% to 15%.

Then more importantly, the Section 232 has been introduced, which has, on the one hand, a negative impact on demand, which is not surprising if you consider that some products have become more expensive by 10% to 20% for customers. So this leads to a slump in demand and also the reduction in profitability because that all the impacts of those tariffs can be fully passed on and compensated.

So this also leads to a certain reduction in profitability of around EUR 10 million to EUR 12 million in 2025, which was not expected only a few months ago. Coming then to Latin America, we have here a very positive development, especially in Brazil.

Due to the latest developments in Argentina, we also hope that here we will see a positive outlook. APAC is clearly dominated by India, which is driving the growth in the region.

Marine, Andreas has already mentioned that Marine is a very important contributor to our bottom line, also to our top line, but even more important to our bottom line. The market environment is still very positive and the profitability is on a very good level.

And last but not least, typically, we don't talk about Russia. Here, we have to mention it because in the last quarters, we have experienced a massive slump in the economy and therefore, also a sharp decline in sales and earnings, which leads to the fact that at the moment, Russia is more or less at breakeven and there is no bottom line contribution out of Russia anymore for the time being.

So what does this mean for the numbers in the segment Sales and Service? So first of all, the external revenue has declined slightly by 2.5% with a profit EBIT of EUR 150 million, which represents an EBIT margin of close to 10%.

So a slight decline compared to last year. However, we will recover to a large extent in the fourth quarter, but Andreas will talk about the outlook later.

What I would like to highlight here is clearly the order book development. So as you all remember, we had a very large order book in the years 2022 and 2023 due to the inflated demand in the post-COVID phase.

In the meantime, we have come down to EUR 1 billion of order book, which is a very healthy level. And this order book level has been stabilized over the last 12 months and even increased slightly.

So we are now quite exactly at EUR 1 billion of order book in the segment Sales and Service. And what is also important, especially having in mind that one of our key strategic pillars is growth in service.

Our Service business share has increased to almost 19% compared to 17.4% in the same period of the last year. Coming now to the second segment, the Segment Operations, which includes all the manufacturing and assembly activities of PALFINGER and also the production for third parties, starting with production for third parties, of course, this activity has been impacted by the challenging economic environment overall.

So here, we are producing components for other machinery producers and of course, we can feel here the still calm overall environment. If we then go further, we see capacity adjustments in both directions.

On the one hand, we increased our capacity at the moment and have been increasing our capacity in Europe and also in Brazil due to the fact that the order intake developments have been positive. On the other hand, due to the tariff policies, we have underutilization in the U.S., and I also mentioned already the fact that in Russia, the market is quite down.

So we see underutilization in the U.S. CIS whereas we increased capacity in Europe and Brazil.

What does this mean in terms of numbers? The external revenue has come down by another 5%.

So every year after 2023 or 2022, we have now seen a certain decline, again, mirroring the overall economic development. The EBIT line is at EUR 10.7 million compared to EUR 22.3 million the year before and driven on the one hand, of course, by the lower utilization in production for third parties, but also by North America and CIS.

Coming then to the segment other nonreportable segments. So this sounds a little bit complicated in the end.

It's just a combination of 2 small units on the one hand, it's the holding unit, which comprises projects and activities for the whole group. On the other hand, it's the Tail Lifts business, which has been carved out of the Global PALFINGER Organization because it's a different industry with specific requirements.

As you can see in the external revenue, the market environment for Tail Lifts, especially in our core markets, Germany and U.S. is difficult.

This has led to a decline in sales for Tail Lifts by almost 20%. In the EBIT line, you see an improvement of EUR 7 million.

However, this is not coming from Tail Lifts. This is mainly because we have increased our intercompany invoicing of projects to other entities.

So this is the main effect of this improvement here in this segment. So coming now to the numbers for the complete group, starting with the revenue.

So the revenue is still 3.5% below the previous year. But as you know from our guidance, we expect now ramp-up and an effect of our ramp-up in capacities in Europe.

The EBIT line is by minus 17.6% down to EUR 130.7 million. And this means an EBIT margin of 7.8% and a consolidated net result of EUR 72.4 million.

So important is to understand that we have now the opposite development compared to the previous year when we started with 2 record quarters based on the record order book we had and then we had a reduction of capacity and now it's the opposite. We are ramping up capacities in 2025.

So we expect here a positive development in Q4. And if you then look at the chart on the right hand, you can see that EMEA has become, again, even a little bit more important due to the positive order intake in the last quarter.

So 59% coming from EMEA in the first 3 quarters, 25% from North America, LatAm and APAC at around 6%. And CIS has declined in importance due to the market development, as mentioned, with around 4%.

So coming now to our balance sheet, and this is really a great development. Our equity has improved by EUR 140 million to EUR 884.7 million, which represents an equity ratio of 41.3%.

The net debt has come down from almost EUR 760 million to EUR 577 million. The gearing ratio, net debt to EBITDA is now -- are now at extremely healthy levels.

So what you can see here is an extremely solid and stable balance sheet of PALFINGER. So our financial strength is absolutely positive.

And this is also coming from the sale of treasury shares, not completed, but also one of the impacts was the sale of treasury shares in summer. So we had proceeds of EUR 100 million by selling 7.5% of the issued shares at the placement price of EUR 35.40.

So this strengthened the balance sheet with an improvement in equity ratio of more than 3% and reduced the gearing ratio by more than 15%. But what is perhaps at least as important, especially for our investors is that this has dramatically increased the attractiveness for our investors.

Now the free float is 43.5%. So this is a substantially higher level than before.

So the liquidity of the share is much better. And now we also have not only a chance, but I would even say a high probability of inclusion in the ATX.

At the moment, we are the #20 on the list, and there is quite a big gap to the #21. At the bottom of the slide, you can see to whom we sold the shares.

So it's long only mainly 3/4 to long-only investors. And then if we look at the regions, we are happy to report that we could also internationalize and diversify our investor bases, especially the U.K., France and the U.S.

with the sale of the treasury shares. What will we do with the EUR 100 million proceeds we could generate from the sale of treasury shares.

Here, you can see several projects we have ahead of us. Of course, these proceeds will help us and enable us to fund these strategic investments to pull some of those forward.

So we will especially expand our service business by investing in service locations in mobile services, especially in North America, but also in service locations in EMEA. We are driving a defense project to generate a product portfolio of highly developed solutions for the armed forces to improve our market position here.

We have already invested in the spare parts hub in North America, which has been opened in September, which cost around EUR 10 million, and we have the investment in a new assembly plant in India ahead of us, which will cost EUR 30 million. Just some examples of what we are going to do.

But as you can see, we can make very good use of the proceeds. Last but not least, let me come to our cash flow statement.

Let me start with Q1 to Q3 2024. You see at the bottom line, the free cash flow was minus EUR 2 million.

In the end, we reached even EUR 120 million of positive free cash flow at the year-end, driven by inventory reduction mainly. This year, we are already EUR 56 million ahead of last year.

So we are fully on track to achieve more than EUR 100 million of free cash flow for the full year. And the main difference compared to the last year is that on the one hand, we will have less potential from change in working capital.

However, the level of investing activities is substantially lower compared to the previous year. So we are happy to report that our target is absolutely realistic, and we are full on track.

With this, I would like to hand back to Andreas Klauser for the outlook.

Yes. Thank you, Felix.

Now let's see what does this mean in nutshell for full year 2025. As Felix already mentioned, unfortunately, U.S.

tariffs were costing us profitability and as well caused a slowdown in our output. Nevertheless, on the other hand, we expect an output increase in Europe.

The good news is here, we are having the orders on hand. So this will be mostly compensated our first 9 months and should result in a quite successful closure of 2025, which also means still good results.

And what does this mean in terms of programs that we are counting on, which is not, let's say, in for 2025. There is a strong fiscal package in Germany, ReArm Europe, I think the amounts are quite well known in Western Europe, RePower Europe.

So all these are the ingredients not to forget about the U.S.A. Stargate project and potentially as well at a certain point in time, the Reconstruction of Ukraine.

It is just a small reminder which kind of areas, which kind of programs are already somehow announced and where we can count on in the future to fully participate. Saying this, yes, we reach higher with our 2030 plus strategy.

This also means, as I mentioned earlier already, strong solid financial targets for 2030. This means on one hand side, EUR 3 billion revenue.

On the other hand, a 12% EBIT margin, 15% ROCE and as a commitment to the market as a commitment to our customers, #1 for Crane and Lifting solutions. At this point in time, let me say thank you for your attention, and we will take your questions now.

First question regarding your '27 outlook. As I haven't read it, just to make sure that the guidance for '27 is still valid?

Yes, the 2027 targets were actually in the presentation of Andreas. So this was Slide #7.

Okay. Okay.

Sorry, then I didn't read that.

Slide #8. Financial targets 2027, EUR 2.7 billion, 10% EBIT margin, 12% ROCE and the free cash flow.

Okay. I'm seeing it already, sorry.

And then on your order backlog, currently at EUR 1 billion, we should expect now a stronger fourth quarter, catching up with some of the declines we've seen throughout the year. But what does this mean now for first half year?

How does your visibility look like? And maybe also sneaking preview to next year?

If possible, to what extent will you need some of these packages to materialize that you show as potentials in order to show further grow towards your '27 targets?

And the good thing is that we are not materializing all the shipments, all the orders we have just in 2025. I think it's already good coverage for Q1 2026.

And this is partially driven already by some of the projects like the fiscal package in Germany. Our dealers are preparing themselves, our customers are preparing themselves now already placing orders to have the equipment available to work on the infrastructure projects.

The same is for ReArm Europe. So most of the European armies, we were already ordering some logistic equipment.

Unfortunately, we can't disclose this further as you understand for sure, the reason. So for us, the starting point looks already good.

And then we will see how it will evolve. But in general, all these projects which are announced are somehow considered but only partially.

So this is not something that all these ingredients need to happen next year that PALFINGER can do its results. We are quite confident that what we see now and what we have in the pipeline will lead us already to a good result in 2026.

Okay. And reflecting on the services share, it's up more than 1 percentage point.

How do you think this will develop going forward, especially also with the potential you have on the equipment business? Do you expect the share to grow materially in the next 2 years?

Or do you think that it will more or less keep the share and increase together with the overall growth that you expect to show?

No, our expectation here is really that the service business will outperform maybe other growth areas, which we have on the equipment. This is clearly defined in the strategy and as well what we see now that our customers might even be willing to extend the life cycle of our products.

So they're investing in service, they're investing in parts and we are doing this as well in North America, we had already established our new spare parts hub Huntley. We are doing certain things, which you have seen earlier in Felix presentation in Europe.

So this will be quite -- should be a quite quick win, which we can see over the next couple of months. And on the other hand, yes, we will kicking in with new equipment on the AWP, Aerial Work Platform.

Aerial Work Platform for example, which will still take a bit of time. But all the ingredients together are making us quite confident that we can get there.

So perhaps to refer to the Slide #9, where you can see that service accounts for around 1/3 of our growth potential. So this means that the 1/3 of growth potential is more than the 19% of service share we have today.

So service is growing over proportionately.

But this will be a gradual improvement. So it's not like back-end loaded.

This is actually a steady trend that we should be seeing in the figures, right?

This is what you can already see in the last years as well.

Patrick Steiner speaking. Two from my side.

First one, how should we interpret the new 2025 guidance? Do you expect to come close to the 2024 results in terms of EBIT?

And the second one is, could you give us a bit more information on the fundamental development of the North American business? Did you expect -- or do you expect any market share losses as a result of the tariffs?

So let me start with the 2025 guidance, how to read this. As you might recall, our target has been even when we communicated the half year results that we aimed for even exceeding the second best year 2024 in terms of EBIT, which would be EUR 186 million.

At that time, we were not, of course, considering that there may be the impact, especially of Section 232, as I said, it's an impact of around EUR 10 million to EUR 12 million for this year's profitability. So this means that you have to assume that we won't get to this level, but we won't be that far away.

So we are talking here about an impact of around EUR 10 million to EUR 12 million, which is now a deviation from our previous guidance. But apart from this, everything remains unchanged.

And about the North American market, here, we can already see that further orders are coming in especially as well now on the service side, which was a little bit slow earlier this year, but now it's coming back. The market is coming back.

So I don't expect here any negative impact for 2026 coming from North America.

So also no market share losses?

Yes, the market share loss, clearly no market share losses, even if you consider the truck mounted forklift, here, we gained market share, but still the U.S. American market, the customers are a little bit hesitant, we are a little bit hesitant to provide orders first to see what's happening, especially on the logistics part, but clearly no market share in the game.

Two questions from my side on tariffs. So firstly, I mean, you mentioned the EUR 10 million to EUR 12 million hit to EBIT in 2025 due to the 232 tariffs.

Given these tariffs were only introduced in the summer and assuming nothing changes with regard to this tariff policy, if I were to annualize that run rate, would it be correct to assume a sort of similar hit of, say, EUR 20 million to EUR 24 million in 2026? Or is there any reason to expect this impact to fade in 2026?

Well, of course, you're right that the Section 232 has to be considered to remain in place. And it would be more or less even 3x the amount if there wouldn't be any counteraction.

But of course, we are constantly improving here our value chain and taking measures to limit the impact of the tariffs. So we do not expect now EUR 36 million.

But yes, there will be a certain impact out of the tariffs also in 2025 because we cannot fully compensate in terms of change of supply chain within a few months or even a few quarters. But we also have to say that we have implemented price increases of up to 18% depending on the product group, which sometimes has already taken effect in some cases, will take effect.

So yes, there will be an impact in 2026, but it won't be 3x the impact of 2025, but it will be also probably a double-digit million number, which still remains as an impact for 2026 from today's perspective at least.

Okay. Great.

That's very clear. And just on that tariff again.

I mean, how much of this tariff surcharge are you currently passing through to customers, both the reciprocal and tariffs Section 232? And how you sort of try to balance increasing your price and passing that through versus accepting lower volumes?

How do you kind of think about balancing that equation? And perhaps whether you are following the same approach here as your competitors or how you see sort of other players in the market kind of choosing to increase prices?

So first of all, everybody tries to pass on the cost increases to the customers. This is also what we do.

As I mentioned, price increases of up to 18%. But the reality is also that it's a lose-lose situation.

So everybody has different strengths and weaknesses. And whenever somebody, for example, with one competitor for Tail Lifts in the U.S.

They have just opened up a new assembly plant in Mexico. So they've doubled the capacity, market is extremely down.

So they decided not to pass on any price increases, and they are the #1 player in the North American market. So there are always some competitive effects you also have to take into consideration.

For example, for Cranes, we are the clear market leader. We can here also dictate more or less what is acceptable and everybody else also has imports from Europe.

But for some other product groups, it's not the case that we can always fully pass on all the cost increases. And this is also true for competition.

So in the end, the tariff situation creates a lose-lose situation for every competitor, but also for the customers.

That's very clear. Just as a reminder, if I understand correctly, you are just as well positioned in the U.S.

in terms of manufacturing, et cetera, than your competitors. I know it differs by product, but it's not like you're structurally worse positioned than competitors?

It depends on the product group. So for example, for loader cranes, we are better positioned than everybody else because we have an assembly plant in Canada, and there is a USMCA agreement in place between Canada and the U.S.

We have assembly plants and manufacturing plants in the U.S. for products, which are also coming from the U.S.

from other manufacturers. So here, we have more or less a local footprint against local competitors.

But it's only in a few cases like for loader cranes where we have a substantial advantage. In some cases, we had advantages in the past like bringing components from Brazil or Europe from low-cost production sites to the U.S.

Now this advantage has disappeared because we are impacted by tariffs to bring these components to the U.S. would also not help because then the cost advantage goes away even if you save some tariffs, it doesn't help a lot.

So in the end, it's not only that it has been an advantage to be in the U.S. It's also that in some cases, we have competitors with a similar setup so that in total, I would say it's a picture where we have still to do some homework to compensate fully the impact of the tariffs, but we'll get there to compensate fully will probably take another year or even 1.5 years.

You already alluded on the U.S. headwind, EUR 10 million to EUR 12 million you expect for this year's EBIT.

But if I would bluntly subtract that from the EUR 186 million you generated last year, I'll end up with EUR 175 million, but that wouldn't imply any improvement of the operating performance this year or year-on-year, although your capacity is higher and Brazil Marine seems to be developed well. Is fair to assume a flat underlying -- organic underlying development, leaving U.S.

impacts aside for the moment?

I think you have to consider again the development last year and this year, I tried to highlight this in the overall group profit development. So we had a record first half year last year.

And now we have the opposite development. So we had a rather weak start into the year with a lower order book and are ramping up capacity.

So it's just the mirroring of what we have seen last year. And if you now say it's the same, it's not true because if we look at the individual regions, for example, Russia has had still a significant EBIT impact in 2024, which has completely done away and which has been fully compensated by other regions like Marine, for example.

Okay. Perfect.

And then you also already shared some thoughts about the U.S. tariff impact you're expecting for next year.

Is it too early to ask how you're looking at next year from an operating business performance? Are you expecting a significant recovery, investment packages finally starting to materialize?

I mean the U.S. is the U.S., pretty sure we can't make any forecast regarding that region.

So would you be okay with me assuming a significant better performance next year? Or would you still say rather be cautious in this regard?

So let me answer this with Slide #8. I think it was showing the 2027 targets.

So our assumption is, of course, that next year, we will see some impact of all those programs. If we would not see any tailwind, of course, we could also not keep our 2027 target.

So the underlying assumption is still that we will see already in the first half year of 2026, some momentum in Europe. If this does not kick in, of course, it would become very difficult to show the year or the results we target for 2026, which has to be somewhere in between of this year results and the 2027 target.

So yes, the underlying assumption is we have to see some positive impact in 2026, which shall also lead then to a substantially better year 2026 in terms of financial results.

Understood. And then last one for you, Felix.

I mean, order backlog up 2% year-on-year. And you're commenting on the order intake by saying order intake stable at a solid level.

If I do a back of the envelope calculation, given your revenue development, order backlog development, I would calculate a Q3 order intake that rose around about 20% year-on-year. Am I doing something wrong in my calculation?

Well, it's a matter of fact that in the last 12 months, every single month with 1 or 2 exceptions has been substantially higher than the comparable month 1 year before. So if this was the question, yes, this is absolutely correct that we have seen this on a constant basis now more or less almost every month.

Okay. Perfect.

No, I was only wondering because you stating order intake stable at a solid level for me, sounds more conservative than what I'm calculating.

Means stable over the last 12 months, but not stable compared to 14, 15 months ago. So we have seen in 2023 and until end of Q3 2024, much lower order intake than output.

So we have been eating up order book more or less every single month for 18 or even more than 18 months. And this has stopped in Q4.

Since then, the order book -- the order intake is more or less on a similar level than the output, which means that the order book has stabilized on a reasonable level of EUR 1 billion. So the order book has changed dramatically anymore for the last 12 months.

Yes. Just one follow-up question from me.

Just on sort of growth drivers for 2026 and beyond. I mean you clearly mentioned that EMEA is the growth driver for Q4 now, but order intake is stable since Q4.

So just wondering when you expect this to start improving materially? Are you sort of starting to see trends already that expect a meaningful pickup into 2026?

Or is the growth in 2026 to be driven more by North America. So despite tariff headwinds, et cetera, I mean, the CapEx cannot be deferred forever, right?

So I'm still guessing that despite these headwinds, the U.S. will be a huge growth opportunity going forward.

So do you expect that also to meaningfully drive growth in 2026?

Well, in the end, it's very difficult to predict when all those packages will kick in. What is important to understand is that PALFINGER is early in the cycle.

So for example, in 2020, after COVID, our order intake picked up already in July, whereas for many industries, it took until the fourth quarter when the improvement happened. So we assume, and this is more or less what banks sometimes think, and I think there are some bankers also in this call now that there might be an impact in the second half.

If we are early in the cycle, we should see already the order intake development, hopefully, at the end of the first half year, and this is also needed upside, we will not see it in the output in half year 2. So our expectation, and of course, this is not the guidance because at the moment, it has not happened, and it's an expectation, a hope an assumption that we should see an order intake improvement already in Q2, which should then lead to an improvement of output and profitability, especially in the second half year 2026.

And here, just to add, as I mentioned earlier, that the German package is already somehow kicking in so that we see already an increase in orders because potentially our customers are expecting the infrastructure deals, which need to anyway happen. The same is that we got provided some orders from some major army as well in Europe.

So this is something which is already slightly kicking in, but not yet to the full amount. And for the others, we are ready to deal with it.

It's just to show you the potential and to show you that it's on our radar that we are not caught [indiscernible].

Okay. Great.

And so it's both ideally the U.S. and Europe that will be driving growth in 2026.

So there's no reason to assume that the U.S. will remain kind of sluggish in '26?

So we expect a certain growth from the U.S., but this is not the big driver. The big driver for 2026 from the base point of view is a recovery in Europe.

Yes. Thank you very much for your attention as well, I think for all the questions which you provided.

I think this has shown how interesting PALFINGER is and as well how clearly we can explain our performance. Stay well and see you soon.

Thank you.